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Old 12-07-2007, 11:11 PM
 
69,368 posts, read 64,228,994 times
Reputation: 9383

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Ok, this posting is in reference to the new bailout of homeowners, and I started to wonder.. Does this bailout actually really benefit the bank?

Reason I ask is, I'm currently buying a 2nd home, a REO property, having my first home paid off (I intend to move, but dont want to have to sell my first in todays economy, but not important for the discussion).

The loan approval has one stipulation.. the bank can get insurance to insure it against a loss in the event of a repo..

So if banks are buying this insurance.. are the banks really losing money on a repo, or is all of this to save insurance companies from un-needed reposessions?

In addition, since the banks are buying insurance, why would they not just dump the properties, claiming the loss to the insurance company, or when someone buys a REO property.. are they really neogitating with the insurance company, and not the bank?

Last edited by pghquest; 12-07-2007 at 11:21 PM..
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Old 12-08-2007, 09:08 AM
 
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,259 posts, read 24,805,744 times
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The insurance only pays what the borrower did not pay in P and I- whether FHA or PMI. It does not pay the back back for attorney fees, repo cost, commissions to resell the property, fix up of the property to prepare it for sale, maintenance of the property while it sits empty nor- most important now- selling the property at a loss due to the glut of foreclosed properties on the market. All this would mean a loss of many thousands of dollars to the bank on a property. And because those who took out smoke-and-mirror loans with no money down have NO equity, that means the bank swallows ALL of it. So yes, although the bank will still lose by not being able to move to a higher interest rate on the loan, they will lose less in most cases than they would with a foreclosure.
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Old 12-08-2007, 06:10 PM
 
69,368 posts, read 64,228,994 times
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Quote:
Originally Posted by KevK View Post
The insurance only pays what the borrower did not pay in P and I- whether FHA or PMI. It does not pay the back back for attorney fees, repo cost, commissions to resell the property, fix up of the property to prepare it for sale, maintenance of the property while it sits empty nor- most important now- selling the property at a loss due to the glut of foreclosed properties on the market. All this would mean a loss of many thousands of dollars to the bank on a property. And because those who took out smoke-and-mirror loans with no money down have NO equity, that means the bank swallows ALL of it. So yes, although the bank will still lose by not being able to move to a higher interest rate on the loan, they will lose less in most cases than they would with a foreclosure.
Thanks for clearing that up. I made a really lowball offer on a property this weekend..was curious if the bank was isolated against the loss..
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Old 12-10-2007, 09:33 AM
 
12,022 posts, read 11,612,281 times
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"Ok, this posting is in reference to the new bailout of homeowners, and I started to wonder.. Does this bailout actually really benefit the bank?"

The government is insuring these loans.

The borrowers have to have 3 percent equity remaining in order to qualify for the FHA refinance under the plan announced on Thursday.
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Old 12-11-2007, 04:57 AM
 
Location: Assisi, Italy
1,845 posts, read 4,233,413 times
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Quote:
Originally Posted by pghquest View Post
Thanks for clearing that up. I made a really lowball offer on a property this weekend..was curious if the bank was isolated against the loss..
PGH

How low did you go? How far off their asking? I have been watching these REOs for a few months now. The "Loss Mitigation" brokers are not very energetic.
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Old 12-11-2007, 05:17 AM
 
69,368 posts, read 64,228,994 times
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Originally Posted by Bob The Builder View Post
PGH

How low did you go? How far off their asking? I have been watching these REOs for a few months now. The "Loss Mitigation" brokers are not very energetic.
The last property I looked at, started at $795K.. by owner.. It ended up being listed by the bank at $299K..

I went in and offered $189K..

Bank said $289K.. I said no.. and waited.. Property ended up selling for $184K. Less money then I offered

The one I'm looking at now, they are asking $164K, probably appraise easily for $199K.. I went in at $108,500. Probably needs about $3K worth of repairs. I should know in a day or two.
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Old 12-12-2007, 09:16 AM
 
Location: Assisi, Italy
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PGH

Good luck. Don't show me your hand, but what state are you in? Calif? Michigan? Florida?
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Old 12-12-2007, 10:32 AM
 
69,368 posts, read 64,228,994 times
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Quote:
Originally Posted by Bob The Builder View Post
PGH

Good luck. Don't show me your hand, but what state are you in? Calif? Michigan? Florida?
Pa here.. I'm from Pittsburgh, but this property isnt..
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Old 12-12-2007, 01:20 PM
 
5,342 posts, read 14,163,912 times
Reputation: 4700
Quote:
Originally Posted by pghquest View Post
Ok, this posting is in reference to the new bailout of homeowners, and I started to wonder.. Does this bailout actually really benefit the bank?

Reason I ask is, I'm currently buying a 2nd home, a REO property, having my first home paid off (I intend to move, but dont want to have to sell my first in todays economy, but not important for the discussion).

The loan approval has one stipulation.. the bank can get insurance to insure it against a loss in the event of a repo..

So if banks are buying this insurance.. are the banks really losing money on a repo, or is all of this to save insurance companies from un-needed reposessions?

In addition, since the banks are buying insurance, why would they not just dump the properties, claiming the loss to the insurance company, or when someone buys a REO property.. are they really neogitating with the insurance company, and not the bank?
The "bailout" is pretty much a bunch of hype that won't help many homeonwers. As for the insurance...more homes in the last few years were financed with 2nd mortgages instead of larger 1st mortgages with mortgage insurance. The lenders holding the 2nds get little to nothing when the property is liquidated.
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Old 12-12-2007, 02:08 PM
 
69,368 posts, read 64,228,994 times
Reputation: 9383
Quote:
Originally Posted by TimtheGuy View Post
The "bailout" is pretty much a bunch of hype that won't help many homeonwers. As for the insurance...more homes in the last few years were financed with 2nd mortgages instead of larger 1st mortgages with mortgage insurance. The lenders holding the 2nds get little to nothing when the property is liquidated.
Ok, that was pretty much my thought, but with all this "bailout" talk, I was wondering what type of incentive a bank would have to accept such a lowball offer, other then the obvious.
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